On Saturday afternoon a Capitol Hill source let it be known that “we’re hearing the White House is demanding major, unambiguous tax hikes. To get spending caps and entitlement tweaks, greater economic pain appears to be the White House’s asking price. It is increasingly likely that we aren’t going to see a ‘big’ deal if the White House doesn’t budge. [The]Speaker looks to be holding strong.”

And indeed, early Saturday night, Speaker of the House Rep. John Boehner (R-Ohio) released a statement indicating: “Despite good-faith efforts to find common ground, the White House will not pursue a bigger debt reduction agreement without tax hikes. I believe the best approach may be to focus on producing a smaller measure, based on the cuts identified in the Biden-led negotiations, that still meets our call for spending reforms and cuts greater than the amount of any debt limit increase.” A senior House advisor told me that still left open the potential for a substantial deal with no tax hikes. “The White House says they’ll veto anything that doesn’t get us through 2012. And Boehner still says we’ve gotta cut more than we raise. So $2 trillion? $2.5?”

Don Stewart, deputy chief of staff for communications for Minority Leader Sen.Mitch McConnell (R-Ky.) emailed me, “Like the Speaker, Sen. McConnell has consistently said that we should cut Washington spending without raising taxes on job creators, particularly in the middle of a jobs crisis. And he remains concerned with the Democrats’ unwillingness to take steps to protect entitlement programs from bankruptcy, but hopes the President will be able to use Sunday night’s meeting to encourage them to take action on needed reforms.”

The White House dished out the spin that suddenly the Tea Party crowd had nixed a deal. In reality, the White House had upped the ante on taxes. A Republican House aide told me that the White House “started to backpedal on entitlement reforms too.” He explained, “They [the White House] had started to go back on some of the Medicare and Medicaid reforms they had previously said they were ok with.” In other words, either the White House never intended to present a viable grand bargain, or, if Obama did, the left got to him.

If the Republicans' position (no tax hikes but significant spending cuts) holds, they will have avoided following Obama down the rabbit hole of class warfare and Keynesian obsession. The alternative would chase off their base and leave them with no message to attract voters fed up with the president’s mismanagement of the economy. The contrast they appear to be drawing with the president could not be more stark.

Friday’s Rose Garden remarks by President Obama were as damning as the unemployment numbers. An eagle-eyed Capitol Hill Republican points to a telling contrast that highlights the intellectual cul-de-sac in which Obama now finds himself.

On Friday he proclaimed: “And over the past few months, the economy has experienced some tough headwinds — from natural disasters, to spikes in gas prices, to state and local budget cuts that have cost tens of thousands of cops and firefighters and teachers their jobs.”

In the Rose Garden last summer he proclaimed: “And that’s why today we’re trying to pass a law that will save hundreds of thousands of additional jobs in the coming year. It will help states avoid laying off police officers, firefighters, nurses and first responders. And it will save the jobs of teachers like the ones who are standing with me today.”

In other words, Obama’s policies have flopped, and the flops now are supposed to justify more of the same.

As he said in his remarks two weeks ago, “You can’t reduce the deficit . . .without having some revenue in the mix.” Technically, of course, you can reduce the deficit without raising taxes; he simply doesn’t want to. This has become a recurring theme in all recent budget fights. The government’s vast deficits stimulate calls to cut spending from the right, which are met by calls to raise taxes from the left. The left’s argument is almost always accompanied by the claim that cutting spending is anti-poor and advocates for cuts are simply tools of the selfish wealthy who resent having to pay their share. According to New York Times columnist Paul Krugman, the “angry rich,” as he calls them, are “wallowing in self-pity and self-righteousness.”

The endless loop of spend and borrow, spend and borrow has brought us to the current situation: The economy skids, the deficit balloons, unemployment rises and tax revenue declines. So naturally, the liberals’ answer is to keep “investing,” make no fundamental change in the primary drivers of the debt, hike taxes on the rich and slash defense.

Unfortunately for the administration, both the Republicans in Congress and the country at large aren’t buying this formula. They know the problem is out-of-control spending. The know that hiking taxes while the job market deteriorates is ludicrous. Now all that remains is for Republicans to craft a deal that adheres to those principles.

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